Merrill Lynch, the Wall Street investment bank, yesterday said it would cut a further 2900 jobs worldwide - but an insider signalled to The Herald that its small Scottish operation may escape unscathed.

Merrill Lynch, the Wall Street investment bank, yesterday said it would cut a further 2900 jobs worldwide - but an insider signalled to The Herald that its small Scottish operation may escape unscathed.

The announcement was made after the bank unveiled worse-than-expected earnings for its first quarter, including $6.5bn (£3.3bn) in write-downs and adjustments primarily linked to the credit squeeze and collapse of the US sub-prime mortgage market.

Over the last three quarters, write-downs at New York-based Merrill, the world's largest brokerage, stand at more than $30bn.

The insider, who asked not to be named, said: "About 1100 jobs were already cut during the first quarter, so the idea is to shrink the global workforce by around 4000 jobs over the course of 2008.

"The only guidance I can give you is that while Merrill has not specified exactly where the cuts will come, they will probably be mostly in the US and probably related to the troubled mortgage market."

However, the firm's global markets and investment banking unit, which includes fixed income, currency, commodity, equity trading as well as banking, will also likely be affected.

That part of the bank recorded a pre-tax loss of $4bn in the first quarter. The lay-offs will save $800m a year in compensation costs, the bank said.

The insider added: "We are not targeting the UK or Scotland or anything like that. Our international operations are extremely important to us - although, I'm not saying there will be no cuts in the UK, I'm saying we're not exactly sure where the cuts will be."

Merrill has a small satellite office for researchers in Edinburgh, which employs seven staff. However, it also has mortgage lending subsidiaries in Scotland, including prime niche lender Wave, formerly called Freedom Lending.

Meanwhile, there were also reports of 900 London job cuts at Swiss bank UBS - about 10% of its workforce in the City - another possible heavy hit caused by the collapse in mortgage-backed assets. UBS declined to comment.

Meanwhile, the FTSE-100 yesterday closed below the 6000-point mark - down 65.8 at 5980.4. However, the Dow Jones Industrial Average clawed by earlier losses to ended the session 1.22 points ahead at 12,620.49.

There are hopes that the steady flow of write-downs suggest the crunch will soon bottom out. Many traders believe that most of the bad news has already hit the market.

Earlier this year, Merrill said its top executives did not receive bonuses for 2007 after it posted $12bn in net losses during the second half of the year.

JP Morgan Chase reported a 50% decline in income earlier this week, revealing that net income fell to $2.4bn, compared with $4.8bn for the same period last year.